Managing Your Career - How to Negotiate a Better Pay Deal from your Boss

By Linda Leung of Network World (advised by James Del Monte of JDA Professional Services, Inc.), JDA Professional Services, Inc.

This article appeared in the 02/27/08 edition of Network World's IT Careers and Training Newsletter which is written by Linda Leung. To view this article on the Network World website CLICK HERE.

Last time, we discussed the best way to use data from salary surveys during performance reviews. A reader wrote in saying that the majority of salary surveys he saw showed that he's way underpaid - how does he ask for more money from his bosses? Last week, we heard advice from two career experts, this week we hear from another, James Del Monte, a Certified Employee Retention Specialist, a Certified Personnel Consultant, and president of staffing firm JDA Professional Services, based in Houston.

Here is Del Monte's advice in his own words:

In today’s market where the demand for certain professionals including those in IT, accounting, and engineering exceeds supply, upward pressure on wages seems to be one of the primary discussions of compensation analysts. The challenge is that internal budgets have continued to increase at the traditional rate of 4% to 6% while market competition is pushing the rate of salary increases for hiring a new IT employee with the same skill set to 10% to 30% above the position’s current salary. Therefore, keeping the compensation level of existing staff competitive with the external market has become a real issue for corporate America. This is especially true in larger, more structured companies where compensation departments set salary ranges for each position and are more rigid about maintaining equality across the board.

Despite this challenge, all companies know they must be competitive if they want to keep their best people. They know that if a talented employee demonstrates an expectation to be well compensated, they must deliver. The key, however, is that even in a competitive labor market if you want to receive what you are truly worth, you must be willing to ask.

THE ART OF NEGOTIATING

Know What’s Important to You

There is definitely an art involved when negotiating a better deal without having to change jobs or leave your company. First, you need to start with the end in mind. You must decide what is most important to you. Come up with a list of reasons why you enjoy your current employer and why you really want to stay. While money is an important factor in most employee’s contentment, there are other aspects that are often equally, if not more, important to many professionals. These include good commute time, available flex time, great management and corporate culture, challenging and interesting work, opportunities for training and personal development, competitive bonuses or profit sharing options, and in some cases you may simply fear change. Developing this list will help you in two ways. One, you can use it during negotiations to enhance your total compensation package if you hit the company salary cap, and two if you are unsuccessful in getting all you want from your current employer, it will help you decide if it is truly worth staying.

Know your Worth

Next, in preparing for your review, it is critical that you understand how you add value to your team and the overall company, how you contribute to the goals of both, and what concrete accomplishments you have made since your previous review. Remember to look at how you broadened your skill level and increased your responsibilities. Make note of any education programs or certifications you completed. Do not forget to write all of these things down on paper. Chances are, when you get in front of your boss, you will need a helpful reminder to ensure you cover all the vital points. The goal in this step is to make sure you have enough ammunition to convey to your boss that you are worth every penny of what you ask.

Know your Market Rate

Next, gather market information regarding local salaries for your industry and your job type. Market comparisons, such as the Houston IT Salary Survey, which JDA conducts on an annual basis, are a great resource and can provide a fairly accurate gauge on where your compensation should fall. If you are located in another area, there are many companies that conduct national surveys including salary.com, payscale.com, and salaryexpert.com. Keep in mind, however, that salary surveys are given in ranges. The question you must ask yourself is, “Where do my skills fit within that range?” It is important that you consider the level of responsibilities, experience, and education you have in comparison to others in your field. Depending on these factors, you may fall anywhere from the very bottom to the absolute peak of your job title’s salary range.

Know your Company Guidelines

Before going into your review, you must also consider that most companies have internal ranges for each position. If you know where you fall in your company’s range, it will help in knowing how much flexibility your manager has to offer. Most companies hire new employees below mid-point of the range so there is room to increase that person’s salary without having to promote. However, once you get to the 70th percentile there is compression, and your manager’s ability to give greater increases diminishes.

Know your Options

If you find that you are already at the top of your position’s range, it might be a good time to start researching your company’s promotional process. Find out more about the position just above yours, the requirements to earn that position, and the rewards involved if you get there. Perhaps moving to the next level will put you where you want to be compensation-wise.

On the other hand, if you find yourself hitting the salary cap, and the idea of a promotion does not work for whatever reason, know that there are likely other options. Be prepared to discuss alternatives that would be of value to you other than a significant increase in base salary. This is where you will want to refer back to the list of things you decided were important to you in the beginning of this process. Perhaps you could ask for an increase in vacation time, an increase in your performance-based bonuses, or more opportunities for telecommuting. Often times it is easier for your boss to approve compensation and incentive items that are not tied directly to your base salary.

If after conducting your research you find that your salary is way out of line (for example 25% below market rate), your company may be willing to make a one-time adjustment to bring your compensation to a more competitive level especially if they really wish to keep you. In high-demand labor markets, like that of today, this strategy is fairly common because the market rate rises so quickly that most long-term employees get left far behind.

On the other hand, if your company is unable to make a base salary adjustment, a one-time bonus might be an option. Bonuses do not increase the company’s fixed costs, and are therefore typically easier to get approved. The upside for you is a larger chunk of cash. The down side is that you will again face the same compensation issue during your next review.

Another idea to keep in mind, when preparing to negotiate, is that reviews do not have to occur simply on an annual basis. Your company may be able to schedule bi-annual or quarterly reviews in which they increase your compensation over a period of time rather than all at once. Perhaps you and your manager can set some goals or deliverables that, if accomplished, will earn you the additional compensation or better yet a promotion.

SET CLEAR GUIDELINES FOR YOURSELF

Once you have done your research and you have discovered where you are vs. where you should be based on the market, you can then decide what you feel you deserve and what you are willing to ask for in your upcoming review. Set both a high and low point which includes base compensation, bonuses, and any non-cash incentives you would like to receive. The high point will be the offer that you ask for right away, and the low point will be the absolute bottom offer you will accept to stay with the company. Chances are you will end up somewhere in the middle.

Using all of your research, develop an outline of the conversation you will have with your boss and the exact points you will make to ensure him, without a doubt, that you deserve the offer you are proposing. Going in with clear goals and a well thought-out plan will help guide you through your meeting, especially if you tend to get nervous under pressure.

If you are one of those employees in the top of your salary range, consider your options before going into the meeting. Whether you choose to ask for a promotion, a one-time salary increase, additional bonuses, or something else have these ideas ready to discuss with your manager.

ASK AND YOU SHALL RECEIVE

Given an opportunity most companies will do everything they can to compensate you fairly and retain you as an employee, especially in a tight labor market like that of today. Unfortunately, it is usually up to you to initiate the conversation. If you expect to get the best deal possible, you have to be willing to ask for it, and you have to provide a good reason for your employer to deliver. It’s just like the popular saying goes – “ask and you shall receive.”

Thanks James for today's advice, and thanks also to Sandi Henrikson, regional manager at national recruitment firm Sapphire Technologies U.S., and Peter Berlich, CEO of Birchtree Consulting for their advice on negotiating better pay deals in the last issue. As always, you can e-mail me your career questions and I'll try and get them answered by our career experts. Go to my blog for more details.